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Social Return on Investment and Why It Matters

5 min read

In today’s world, businesses are increasingly expected to demonstrate their contribution to society. One of the most effective ways to do this is by measuring their social impact. Social impact is a broad term that encompasses a great deal of potential initiatives to create positive change – be that planting trees, upskilling young people, employee volunteering, donating to charities and plenty more.

With so many ways in which to add value and no shortage of social issues to tackle, the landscape of understanding where value is being created, how much is being created and the effectiveness of the mobilisation of resources can become difficult to measure and interpret.

What is Social Return on Investment?

Social Return on Investment, or SROI, is a relatively new term that takes our traditional understanding of ROI and applies it to a social responsibility context. Rather than only focusing on financial profit, it assesses the broader effects of a company’s activities, and translates qualitative benefits into quantifiable, measurable outcomes—giving a much easier to interpret metric for knowing how effective an investment has been in a given initiative. Put simply, an SROI of 2:1 would be a successful project where every unit of currency spent on facilitating the project is calculated to have delivered double the value in tackling the social issue in question.

This is becoming a fundamental part of modern business strategy, shaking off notions of being a vanity metric, the sophistication of measurement tools available means we are moving towards a business environment where organisations will need to take their social impact, and by extension SROI, seriously in order to remain competitive and respected by all stakeholders.

The most innovative and game-changing organisations are embedding these measurement practices into their daily activities and this is the exciting point where businesses can become incredibly efficient engines of social change. Instead of viewing social impact initiatives in isolation, they become part of the fabric of why the business exists.

SROI in the UK

In recent years, the focus on social value has been driven by growing global concerns, including climate change, social inequality, and economic instability. Consumers and stakeholders expect businesses to be part of the solution to these pressing issues.

In the United Kingdom, the regulatory landscape has played a significant role in this shift. The Social Value Act of 2012 and the subsequent introduction of the Social Value Model have placed legal obligations on businesses to demonstrate how their operations benefit society. Public sector organisations are now required to consider social value in the procurement of services, meaning that businesses hoping to win government contracts must be able to quantify their contributions to society. The much-anticipated Procurement Act 2023, set to come into force in early 2025, is another legislative tool that is expected to build on the work of the Social Value Act to make social value more integral to procurement imperatives in the UK. Similarly, the introduction of global frameworks like the United Nations Sustainable Development Goals (SDGs) has created a universal language for businesses to align their operations with broader social and environmental goals.

Within this regulatory framework, SROI has become an indispensable tool for tracking, measuring, and communicating the societal contributions of businesses. It enables companies to link their everyday activities with larger global objectives, such as reducing inequalities, improving education, and promoting sustainable economic growth. This makes SROI a valuable metric not only for demonstrating compliance with regulations but also for building trust and goodwill with consumers, investors, the wider public and other stakeholders.

SROI and the Skills Agenda

One of the areas where SROI can be a particularly impactful measurement is in the realm of skills development, a crucial issue for economies across the world. The “skills agenda” refers to the need to equip individuals, particularly young people, with the skills required to succeed in today’s ever-evolving job market. This is an urgent priority as the nature of work continues to change, driven by technological advancements, shifting labour market demands, ageing workforces and the global transition to low-carbon economies.

As a result, companies are increasingly recognising the importance of investing in work-based learning programmes, internships, apprenticeships, and other career development initiatives. These initiatives not only benefit young people by enhancing their employability but also help businesses address skills shortages and ensure they have a pipeline of qualified workers for the future. However, measuring the long-term impact of these programmes has traditionally been challenging and riddled with guesswork.

This is where science-based SROI calculation comes into play. By calculating the SROI of skill-development initiatives, businesses can gain a clear and quantified understanding of the value their initiatives provide to individuals and society as a whole. In doing so, businesses armed with this knowledge are also able to better optimise their resources towards the most effective development programmes in the future. Improved employability, enhanced job satisfaction, greater economic stability for participants, reduced burdens on social support systems and many other factors can be incorporated into these SROI calculations.

How to calculate SROI

The partnership between Springpod and GIST Impact stands to revolutionise how employers measure the impact of their careers education initiatives. Through the integration of GIST Impact’s Power SROI platform with Springpod’s work-based learning experiences, employers will now be able to track the SROI of these programmes with precision. This will enable businesses to quantify their contributions to the skills agenda, showing how they are helping to enhance employability and workforce readiness while meeting the demands of regulatory frameworks.

This partnership is a game-changer for businesses that are serious about delivering robust and communicable social impact.

For more details on the partnership, read the press release.

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